New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

Eliot Spitzer
Governor

Eric R. Dinallo
Superintendent

The Office of General Counsel issued the following opinion on November 29, 2007, representing the position of the New York State Insurance Department.

Re: Provision of Domestic Partner Coverage to Same-Sex Partners but not to Opposite-Sex Partners

Question Presented:

Does the Insurance Law, or the regulations promulgated thereunder, prohibit an accident and health insurer from providing domestic partner coverage to same-sex partners but not to opposite-sex partners?

Conclusion:

There is nothing in the Insurance Law or the regulations promulgated thereunder that mandate that an insurer provide domestic partner coverage at all. In addition, nothing in the Insurance Law or the regulations promulgated thereunder require that an insurer that voluntarily provides domestic partner coverage to same-sex partners must also provide such coverage to opposite-sex partners. Moreover, as noted in the 1994 Insurance Department opinions discussed below, there is a rational basis for an insurer’s decision to limit domestic partner coverage to same-sex partners, because same-sex partners do not have the ability to marry and demonstrate the family relationship required for coverage under current New York law, except by relying upon their status as dependents. Opposite-sex partners, however, have the ability to marry and obtain coverage on that basis.

Facts:

The inquirer asks whether the enactment of SONDA alters the conclusion of the OGC Opinion issued on June 9, 1994 (“the June 1994 opinion”). That opinion noted that “there is no statute in New York expressly prohibiting discrimination based upon sexual orientation,” and concluded that insurers may limit health insurance coverage of domestic partners to same-sex partners only. On December 7, 1994, the OGC issued another opinion (“the December 1994 opinion”), which again noted that “there is no statute in New York expressly prohibiting discrimination based upon sexual orientation,” and reached the same conclusion as the June opinion.

In the time since those two opinions were issued, however, the New York Legislature has enacted SONDA, which prohibits discrimination predicated upon sexual orientation. The inquirer asks whether the Department’s position, as expressed in the June and December opinions has changed, given the enactment of that statute.

Analysis:

As a preliminary matter, it bears emphasizing that although the 1994 opinions mentioned that there was no law in New York that prohibited discrimination based on sexual orientation, the analysis and conclusions reached in those opinions were not driven in any significant way by the absence of such a law.

It also bears emphasizing that the Insurance Law does not mandate that insurers provide domestic partner coverage. Specifically, N.Y. Ins. Law § 4235(f) (McKinney 2006), which pertains to group accident and health insurance policies issued by commercial insurers, provides in pertinent part as follows:

(f) Any policy of group accident, group health or group accident and health insurance may include provisions for the payment by the insurer of benefits for expenses incurred on account of hospital, medical or surgical care …for the employee or other member of the insured group, his spouse, his child or children, or other persons chiefly dependent upon him for support and maintenance….(Emphasis added.)1

Insurance Law § 4235(f) makes no express mention of domestic partner coverage.

To the extent that an insurer chooses to offer domestic partner coverage, such coverage must come within the “chiefly dependent” standard in Insurance Law § 4235(f). The "chiefly dependent" language in Insurance Law 4235(f) has been construed to include both unilateral dependence and mutual interdependence, which may be evidenced by a nexus of factors, including common ownership of property, common house holding, shared budgeting, or length of relationship. See OGC Opinion 05-01-15 (January 20, 2005). The registration of a domestic partnership, such as is authorized by New York City Administrative Code § 3-420, et seq. (1999), would constitute strong evidence of mutual interdependence. See OGC Opinion 05-01-15 (January 20, 2005).

Recent OGC opinions have broadly addressed issues relating to domestic partner coverage, but have not addressed the specific issue of whether an insurer may offer domestic partner coverage to same-sex but not to opposite-sex couples on a purely voluntary basis. For example, in OGC Opinion 05-10-07 (October 12, 2005), the OGC opined that “[e]ven if the employer desires to provide opposite sex domestic partner coverage, an insurer is not required to offer such coverage. However, if the insurer offers opposite sex domestic partner coverage to any small group, it must offer such domestic partner coverage to all small groups.” Similarly, in OGC Opinion 04-05-25 (May 19, 2004), the Department concluded that “[e]ven if the employer-policyholder requests such coverage, because these coverages are permissive rather than mandatory, the insurer has the option of whether or not to offer them…An insurer that offers coverage to some dependents of the insured is not obligated to offer it to all potential classes of dependents, provided that the distinction is not based on unlawful discrimination.” The same opinion further concluded, however, that “the Department has interpreted N.Y. Comp. Codes R. & Regs. tit. 11, § 360.3 (1998) (Regulation 145) as requiring an insurer that has provided domestic partner coverage to a small group to provide it to any other eligible small group that applies for it.” The OGC recognizes that both of these opinions could be read to require an insurer that chooses to offer coverage to same-sex domestic partners to also offer the same coverage to opposite-sex domestic partners.

The OGC is of the view that the Department’s position is clearly set forth in the June and December 1994 opinions. In the December 1994 opinion, in particular, the Department noted that domestic partner coverage is discretionary rather than mandatory, and concluded that “[d]iscrimination among policyholders by insurers is inherent to underwriting thus, if not prohibited as unfair discrimination or otherwise unlawful, is permitted.” Where an insurer has chosen to provide accident and health insurance coverage to same-sex domestic partners but not to opposite-sex domestic partners, the question therefore arises as to whether that insurer’s decision constitutes unfair discrimination under the Insurance Law, or is otherwise prohibited by law. N.Y. Ins. Law § 2607 (McKinney 2006) is seemingly relevant to that question. The statute provides:

No individual or entity shall refuse to issue any policy of insurance, or cancel or decline to renew such policy because of the sex or marital status of the applicant or policyholder.

The December 1994 opinion analyzed whether such a distinction by an insurer constitutes unlawful or unfair discrimination based on sex or marital status, and found that there is no discrimination based on sex (gender), since the limitation does not treat female or male domestic partners differently. The opinion also noted that the limitation is not based on marital status because in both cases, the domestic partners are unmarried. Therefore, the prohibition set forth in Insurance Law § 2607 is not dispositive of the issue.

The December 1994 opinion found, however, that insurance coverage offered to same-sex domestic partners but not to opposite-sex domestic partners constitutes discrimination based upon sexual orientation (i.e., the sexual preference of the partners). The opinion further observed that neither the Insurance Law nor the regulations promulgated thereunder set forth any specific prohibition against discrimination based on sexual orientation (and that continues to be the case today).

Nevertheless, notwithstanding the December 1994 opinion, the Superintendent could conclude, pursuant to Article 24 of the Insurance Law, that the limitation in question is a “determined violation.” In particular, Insurance Law § 2402(c) defines a determined violation as:

any unfair method of competition or any unfair or deceptive act or practice, which is not a defined violation but is determined by the superintendent pursuant to section two thousand four hundred five of this article to be such method, act or practice.

In addition, Insurance Law § 2403 prohibits any person from engaging in this state in any unfair or deceptive act or practice constituting a determined violation.

However, the OGC has stated that there is no determined violation if, as stated in the December 1994 opinion, a rational basis exists for an underwriting limitation. In that circumstance, there would not be unfair discrimination within the meaning of Insurance Law § 4224. That statute provides in pertinent part as follows:

(b) No insurer doing in this state the business of accident and health insurance…shall:

(1) make or permit any unfair discrimination between individuals of the same class in the amount of premiums, policy fees, or rates charged for any policy of accident and health insurance, or in the benefits payable thereon, or in any of the terms or conditions of such policies, or in any manner whatsoever.

In conducting a rational basis analysis, the December 1994 opinion concluded that:

[a] rational basis does exist, based on the fact that the two groups are not similarly situated under the Insurance Law. Same sex partners have no ability to evidence the family relationship required for coverage under the law except by relying upon their status as dependents; heterosexual couples have the additional option available of marrying. It therefore is not unreasonable for employers who cover spouses to extend coverage only to those domestic partners who are legally incapable of marrying, while denying it to those who could marry but choose not to. Were individuals of the same sex permitted to marry, and were they therefore as capable of securing coverage under the Insurance Law as their opposite sex counterparts, the limitation at issue here would, in my view, be irrational and unlawful. That, however, is not the case. (Emphasis added.)

Consistent with the 1994 opinions, there remains a rational basis for an insurer to limit domestic partner coverage to same-sex but not opposite-sex partners, because as in 1994, same-sex partners still do not have the right to marry in New York. See, e.g., Hernandez v. Robles, 7 N.Y. 3d 338 (2006).

But the analysis of the issue cannot end there, because the June 1994 opinion about which the inquirer asked noted that “there is no statute in New York expressly prohibiting discrimination based upon sexual orientation.” In the time since that opinion (and the December 1994 opinion) was issued, the Legislature enacted SONDA, which is set forth in N.Y. Exec. Law § 296 (McKinney Supp. 2006). SONDA prohibits discrimination predicated on sexual orientation. Specifically, Executive Law § 296(1)(a) provides:

1. It shall be an unlawful discriminatory practice:

(a) For an employer or licensing agency, because of the age, race, creed, color, national origin, sexual orientation, military status, sex, disability, predisposing genetic characteristics, or marital status of any individual, to refuse to hire or employ or to bar or to discharge from employment such individual or to discriminate against such individual in compensation or in terms, conditions or privileges of employment.

Nothing on the face of SONDA appears to compel a different conclusion than that reached in the June and December 1994 opinions. There continues to be a rational basis for limiting domestic partner coverage to same-sex domestic partners because, under current New York law, such partners, except by relying upon their status as dependents, still have no ability to marry and demonstrate the family relationship required to be eligible for coverage. Opposite-sex domestic partners, however, have the legal right to marry and obtain health coverage on that basis.

While it is the role of the Insurance Department to interpret the Insurance Law, it is the role of the New York State Division of Human Rights (“NYSDHR”) to construe or administer SONDA, because NYSDHR is the agency responsible for enforcing Executive Law § 296. In the absence of any formal legal ruling that the Department’s interpretation of the Insurance Law contravenes SONDA, the Insurance Department will continue to adhere to the conclusions set forth in the June and December 1994 opinions. Accordingly, to the extent that conclusions reached in OGC opinions issued after 1994 could be construed to run counter to the analysis set forth in the instant opinion, those opinions no longer should be followed.

Given the uncertain state of the law, the Department is of the view that insurers should be encouraged to extend to consumers health insurance coverage even if not mandated by law, and to provide domestic partner coverage to same-sex domestic partners in recognition of the reality that opposite-sex domestic partners have other legal options available to them - such as marrying - that same-sex domestic partners at this time do not have under current New York law. If the Department were to start requiring that insurers that voluntarily offer domestic partner coverage offer it across the board to both same-sex and opposite-sex domestic partners, the Department could be faced with a situation whereby insurers might choose not to offer domestic partner coverage at all, thereby leaving many same-sex domestic partners without needed health coverage.

In sum, an insurer’s limitation of coverage to same-sex domestic partners is not prohibited by the Insurance Law or regulations, and the enactment of SONDA in 2002 does not on its face appear to compel a different conclusion. Should New York law change to permit same-sex domestic partners to marry, the Department would likely revisit the issue presented here.

For further information the inquirer may contact Associate Attorney D. Monica Marsh at the New York City Office.

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1 Insurance Law § 4305(c)(1), which pertains to group contracts issued by not-for-profit health insurers and health maintenance organizations, has a similar provision.